Consumer information surplus and adverse selection in competitive health insurance markets: an empirical study |
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Authors: | van de Ven W P van Vliet R C |
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Institution: | Department of Health Policy and Management, Erasmus University, Rotterdam, The Netherlands. |
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Abstract: | If premiums for health insurance are not risk related, there exists a consumer information surplus that may result in adverse selection. Our results indicate that insurers can greatly reduce this surplus by risk-adjusting the premium. We conclude that there need not be any substantial unavoidable consumer information surplus if consumers can choose whether to take a deductible for a one- or two-year health insurance contract with otherwise identical benefits. Therefore, adverse selection need not be a problem in a competitive insurance market with risk-adjusted premiums or vouchers and with such a consumer choice of health plan. |
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